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Chapter4 - quantity The converse is also true Graphic...

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Chapter 4 Markets in Action CHAPTER SUMMARY This chapter picks up where Chapter 3 left off. It begins by analyzing the impact of changes in demand and supply on the equilibrium price and quantity. This is followed by a look at the impact of price ceilings and floors. This chapter concludes with a look at market failures. Once equilibrium in a market is established, it may change if there is a change in demand or supply---shifts of the curves. An increase in demand creates a higher equilibrium price and quantity. An increase in supply creates a lower equilibrium price and greater equilibrium
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Unformatted text preview: quantity. The converse is also true. Graphic analysis visually illustrates this. Price ceilings, like rent controls, are legal prices set by government below equilibrium and they create shortages. Price floors (supports), like the minimum wage, are legal prices set by government above equilibrium and they create surpluses. Some market failures include: lack of competition, externalities, public goods, and income inequality. NEW CONCEPTS INTRODUCED price ceiling market failure externality price floor public good...
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